FSA: Body Shop worker fined for market abuse

A former IT worker at the Body Shop who short-sold the firm's shares after accessing inside information about confidential trading figures has been fined £85,000.

The Financial Services Authority hit John Shevlin with the fine after an investigation found that he had made a profit of almost £40,000 by shorting the company's shares in January 2006. He made the trade after accessing the email accounts of several senior Body Shop executives. Shorting involves selling borrowed shares in the expectation that the price will fall and they can be bought back later, leaving the seller with a profit.

According to the FSA, Shevlin saw confidential details of the company's Christmas trading results and a draft announcement that the company had failed to meet market expectations.

He then borrowed £29,000 - more than his annual salary - and on January 10 2006 established a short position equivalent to 80,000 shares in the Body Shop through a contract for difference. He closed the position the next day, making a profit of £38,472, after the company issued a profit warning that sent its shares down 18%.

"This trade was made on the basis of inside information," the regulator announced yesterday.

Margaret Cole, director of enforcement at the FSA, said: "Shevlin deliberately set out to obtain highly sensitive and valuable information to which he was not entitled. He abused the trust placed in him by his employers and misused his technical skills to gain a financial advantage."

Cole said the case showed that anyone who took advantage of market-sensitive data faced significant sanctions. Last week, the FSA dropped its inquiry into the short-selling of HBOS shares after failing to find evidence of share manipulation.

The Body Shop inquiry began in early 2006 after Shevlin's broker informed the FSA of the deal. A spokeswoman said that at that time the regulator did not press charges in such cases - a policy it has since changed. She added that proof only emerged recently that he had accessed confidential emails at Body Shop. Shevlin could be pursued through the civil courts if he does not pay the fine.

Cole warned that the case showed that the FSA would fine people even if they were not covered by its approved persons system, under which staff in certain roles must get clearance from the regulator.

The Body Shop said Shevlin had left the firm, which was bought by L'Oréal in March 2006. A spokeswoman said: "One of our former employees was subject to an inquiry by the FSA. This investigation has found no wrongdoing or security failures on the part of the Body Shop."

The FSA recently began a push to ensure that firms handling confidential information about takeovers, such as public relations firms and law firms, understand the rules governing market-sensitive data.

Adair Turner, the FSA's incoming chairman, will face tough questioning by MPs on the Treasury select committee today. Some Labour MPs are frustrated by the regulator's record in cleaning up the City. In its annual report on Monday, the regulator revealed that it had not resolved any market conduct cases in 2007. It levied £4.45m in fines, compared with £14.66m in 2006. It also banned 30 individuals.